Income Tax Slab Rates AY 2026-27 (FY 2025-26) — New vs Old Regime, Rebate, Surcharge & Marginal Relief

1New regime slab rates for AY 2026-27 (the default)

Since the Finance Act 2023 the new regime under section 115BAC is the default. You are taxed under it automatically unless you actively opt for the old regime. For AY 2026-27 the rates apply identically to every individual regardless of age — unlike the old regime, the new regime gives senior and super-senior citizens no higher exemption limit.

2New regime slabs — income bands and rates

• Up to ₹4,00,000 — Nil
• ₹4,00,001 to ₹8,00,000 — 5% (tax of ₹20,000 at the top of this band)
• ₹8,00,001 to ₹12,00,000 — 10% (cumulative ₹60,000)
• ₹12,00,001 to ₹16,00,000 — 15% (cumulative ₹1,20,000)
• ₹16,00,001 to ₹20,00,000 — 20% (cumulative ₹2,00,000)
• ₹20,00,001 to ₹24,00,000 — 25% (cumulative ₹3,00,000)
• Above ₹24,00,000 — 30%

3Old regime slab rates — and why age still matters

The old regime keeps the ₹2,50,000 basic exemption and the three-rate structure, but raises the exemption for older taxpayers. It remains available to anyone who opts out of the default, and for taxpayers with large deductions it can still win.

For those under 60: nil up to ₹2,50,000; 5% from ₹2,50,001 to ₹5,00,000; 20% from ₹5,00,001 to ₹10,00,000; 30% above ₹10,00,000.

For senior citizens aged 60 to 80, the nil band runs to ₹3,00,000. For super-senior citizens aged 80 and above it runs to ₹5,00,000, after which 20% applies up to ₹10,00,000 and 30% beyond. This age-based relief has no equivalent in the new regime, which is one reason older taxpayers with modest incomes sometimes stay with the old regime.

4Standard deduction — where ₹12,75,000 comes from

The new regime gives salaried taxpayers and pensioners a standard deduction of ₹75,000; the old regime gives ₹50,000. This is subtracted from gross salary before the slabs are applied, which is why the widely quoted figures differ.

The ₹12,00,000 threshold everyone cites is a threshold on taxable income, not on salary. A salaried person with ₹12,75,000 gross arrives at ₹12,00,000 taxable after the ₹75,000 standard deduction, and therefore pays nothing. Someone with ₹12,75,000 of business or freelance income gets no standard deduction, lands at ₹12,75,000 taxable, and does owe tax. The same headline number means different things depending on how you earn.

5Section 87A rebate — the ₹12,00,000 threshold

Under the new regime the section 87A rebate is up to ₹60,000 where taxable income does not exceed ₹12,00,000. The slab tax at exactly ₹12,00,000 is ₹60,000, so the rebate wipes it out entirely and the tax is nil. That is the whole mechanism behind the no-tax-up-to-₹12-lakh headline: the slabs still charge tax, and the rebate then cancels it.

Under the old regime the rebate is up to ₹12,500 where taxable income does not exceed ₹5,00,000, making ₹5,00,000 the effective nil point there.

One important limit: the rebate does not apply to income taxed at special rates, such as long-term capital gains under section 112A. If part of your income is capital gains, that part is taxed on its own terms and the rebate will not shelter it, even if your total stays under ₹12,00,000.

6Marginal relief — the rule most calculators get wrong

Read the rebate rule literally and it produces an absurdity. At ₹12,00,000 taxable the tax is nil. At ₹12,00,001 the rebate vanishes, the full ₹60,000 of slab tax revives, and with cess the bill is ₹62,400. One extra rupee of income would cost ₹62,400 of tax.

Marginal relief, introduced for the new regime by the Finance Act 2025, exists to prevent exactly that. It caps the tax at the amount of income earned above ₹12,00,000, so the extra tax can never exceed the extra income.

The Income Tax Department's own illustration: at a total income of ₹12,10,000 the tax works out to ₹61,500 before relief. Marginal relief limits it to ₹10,000 — the amount above the threshold — and 4% cess brings the payable figure to ₹10,400.

The relief stops mattering at about ₹12,70,588, the point where ordinary slab tax falls below the excess over ₹12,00,000. Above that the normal computation is already the lower number and relief simply has nothing to do.

7Surcharge — the layer above ₹50,00,000

Surcharge is charged on the income tax itself, not on income, and only once total income crosses ₹50,00,000. It is nil up to ₹50,00,000, then 10% above ₹50,00,000, 15% above ₹1,00,00,000 and 25% above ₹2,00,00,000.

The regimes diverge at the top. The old regime carries a 37% band above ₹5,00,00,000; under section 115BAC(1A) that band does not apply, so the new regime is capped at 25%. For very high earners this cap is one of the new regime's largest advantages.

Where the income includes dividends or capital gains, the surcharge on that portion is restricted to 15% regardless of the band.

8Marginal relief on surcharge works the same way

Each surcharge threshold would create its own cliff without relief. Crossing ₹50,00,000 by a single rupee would add 10% surcharge on the entire tax — roughly ₹1,08,000 — for one rupee of income.

So relief applies at every threshold: total tax plus surcharge cannot exceed what a person exactly at the threshold pays, plus every rupee earned above it.

At ₹51,00,000 taxable under the new regime, the slab tax is ₹11,10,000 and a 10% surcharge would make it ₹12,21,000. But a person at exactly ₹50,00,000 pays ₹10,80,000, and the excess income is ₹1,00,000, so the cap is ₹11,80,000. Add 4% cess and the payable figure is ₹12,27,200.

A consequence worth understanding: inside a relief zone your marginal rate is about 104%, because the relief caps the income tax at the excess and cess is then charged on top of that capped figure. It feels wrong, but it is the correct outcome and far better than the cliff it replaces.

9Cess — the last 4%

Health and education cess of 4% is applied at the very end, on income tax plus surcharge after any marginal relief. It is not a slab and there is no exemption from it. Every rupee figure quoted as final in this guide already includes it: ₹1,20,000 of slab tax at ₹16,00,000 becomes ₹1,24,800 payable.

10Worked examples across the range (new regime, taxable income)

• ₹12,00,000 — slab tax ₹60,000, rebate ₹60,000, tax NIL
• ₹12,10,000 — slab tax ₹61,500, marginal relief caps it at ₹10,000, plus cess = ₹10,400
• ₹16,00,000 — slab tax ₹1,20,000, no rebate, plus cess = ₹1,24,800
• ₹30,00,000 — slab tax ₹4,80,000, plus cess = ₹4,99,200
• ₹50,00,000 — slab tax ₹10,80,000, still no surcharge, plus cess = ₹11,23,200
• ₹51,00,000 — surcharge applies but marginal relief caps tax at ₹11,80,000, plus cess = ₹12,27,200
• ₹60,00,000 — slab tax ₹13,80,000 plus 10% surcharge ₹1,38,000, plus cess = ₹15,78,720

11What the new regime takes away

The lower rates are paid for by giving up most deductions. Under the new regime you cannot claim section 80C investments, 80D health insurance premiums, HRA exemption, LTA, the section 24(b) interest deduction on a self-occupied home, or most of Chapter VI-A.

What survives is narrow but real: the ₹75,000 standard deduction, the employer's NPS contribution under section 80CCD(2), and section 24(b) interest on a let-out property.

This is the whole basis of the comparison. The new regime wins by default for anyone without substantial deductions. The old regime wins when 80C, 80D, HRA and home-loan interest together are large enough to outweigh the rate difference — often around ₹3,50,000 to ₹4,00,000 of total deductions, though the exact crossover depends on your numbers.

12Common mistakes we see

• Applying the ₹12,00,000 threshold to gross salary instead of taxable income — the ₹75,000 standard deduction sits in between
• Assuming ₹12,75,000 is tax-free for everyone; it is a salaried figure, and freelancers and business owners get no standard deduction
• Expecting the 87A rebate to shelter capital gains — it does not apply to special-rate income
• Believing a rupee over ₹12,00,000 costs ₹62,400; marginal relief prevents that
• Forgetting that surcharge is charged on the tax, not on income
• Choosing a regime once and never revisiting it — a salaried taxpayer may switch each year
• Ignoring the 4% cess when budgeting for the final payment

13Which regime should you pick

There is no universal answer, only arithmetic. Add up everything you can genuinely claim under the old regime — 80C, 80D, HRA, home-loan interest, and the ₹50,000 standard deduction — and compare the resulting tax with the new regime figure on the same income.

A salaried taxpayer can switch between regimes each year at the time of filing, so the decision is not permanent. Someone with business or professional income faces a stricter rule: once you opt out of the new regime you may return to it only once, so the choice deserves more care.

Our free calculator runs both regimes side by side for AY 2026-27, including the rebate, marginal relief, surcharge and cess described above.